Expansion of central banks' central bank digital currency projects
Central Banks Embrace Digital Currencies for Cross-Border Payments
A new survey by the Bank for International Settlements has revealed that 94% of central banks are now working on Central Bank Digital Currencies (CBDCs) in some form, with a significant focus on improving cross-border payments.
The survey, which includes 86 central banks from around the world, shows a growing interest in CBDCs, particularly among Advanced Economies (AEs). There has been a much greater increase in retail CBDC proof-of-concepts among AEs compared to Emerging Markets and Developing Economies (EMDEs).
In the retail sector, central banks are focusing on potential efficiency gains in their CBDC strategies. For many central banks, combating potential threats from privately issued money is a significant factor. In the wholesale sector, cross-border payments remain a significant focus.
The trend in cross-border payment strategies for CBDCs emphasizes real-time, blockchain-enabled, and interoperable payment solutions. Central banks and payment networks are pushing Real-Time Payments (RTP) capabilities worldwide to make cross-border transfers near-instantaneous. Initiatives like SWIFT GPI and Project Nexus are enhancing liquidity and transparency, critical advantages for global commerce.
Many central banks are exploring or piloting CBDCs to streamline cross-border trade and payments with faster settlements and reduced intermediaries. CBDCs often rely on Distributed Ledger Technology (DLT) to enhance efficiency and visibility of payments. Examples include China’s digital yuan, the European Central Bank’s digital euro, and India’s digital rupee.
Stablecoins, pegged to fiat currencies, are increasingly integrated into cross-border payments infrastructure alongside CBDCs, offering interoperability and efficient remittances especially in emerging markets. Payment providers and fintechs are incorporating stablecoin capabilities to serve global trade needs and remittance services.
Central banks are also focusing on expanding access to formal financial services in emerging markets, thus supporting greater inclusion and participation in the global economy. Enhanced security and interoperability through technology, including AI, machine learning, APIs, and open banking frameworks, underlie these strategies.
However, despite this increase, the number of live or close-to-live CBDCs remains very low. Slightly under a third of central banks are focusing exclusively on retail solutions for CBDCs, while the majority (around 68%) are working on CBDCs that combine solutions for both wholesale and retail.
In summary, central banks are prioritizing the development and integration of CBDCs in conjunction with blockchain, stablecoins, and supporting technologies to enable faster, more transparent, and cost-effective cross-border payments globally, with particular attention to interoperability and financial inclusion in emerging markets.
Finance and technology are integral to central banks' strategies for implementing Central Bank Digital Currencies (CBDCs), particularly in improving cross-border payments. For instance, Real-Time Payments (RTP) capabilities, Distributed Ledger Technology (DLT), and AI are all being explored to make cross-border transfers near-instantaneous and enhance the efficiency of CBDCs.
